UPDATE: Missouri Gov. Nixon vetoes, freezes $1 billion of spending

JEFFERSON CITY — Gov. Jay Nixon vetoed or froze more than $1.1 billion in spending Tuesday for Missouri's next budget, citing concerns about declining revenues and the potential for new tax breaks to drain state dollars even further.

Nixon's budget cuts include nearly $276 million in line-item vetoes and $846 million in spending restrictions affecting items ranging from public schools and universities to the Medicaid health care program.

These cuts include more than $77 million to MU and more than $2 million to Columbia Public Schools for projects and daily operations.

The Democratic governor said his actions were necessary because the budget approved by the Republican-led legislature was "dangerously out of balance."

"This is economic reality," Nixon said at a news conference.

Missouri's new budget is to take effect July 1.

Nixon's actions mean there will be no funding increase for public school districts, colleges or universities when the new school year begins. But the governor said the education money would be the first to be released if legislators in September sustain his previously announced vetoes of bills granting special tax breaks to a variety of industries and organizations.

In Boone County, these restricted funds funds include $38.5 million for renovations to Lafferre Hall, $25 million to build a new research center for the State Historical Society — currently located in Ellis Library — and $10 million to fund the Applied Learning Center, an entrepreneurship center run through Trulaske College of Business. Columbia Public Schools expected an increase in state funds of more than $2 million, which is also being restricted for the time being.

Senate Appropriations Committee Chairman Kurt Schaefer of Columbia said the governor was "holding school kids hostage" to try to get his way on tax policy and, ultimately, to try to persuade the legislature to expand Medicaid eligibility for low-income adults, which would draw additional federal dollars.

University of Missouri System President Tim Wolfe said in a statement Tuesday that the funding being held in limbo makes it difficult for MU to achieve its mission.

"We recognize the state budgetary challenges, and are concerned that the uncertainty of this critical funding will make it difficult for us to plan for the future, prepare the state's workforce for Missouri's future economy and help move the state forward," he said.

He said the delays prevent the university from carrying out building projects that will provide a boost to the local economy.

This marks the second straight year that Nixon has used budget restrictions as a means of gaining leverage over lawmakers during the September veto session.

Last year, Nixon froze about $400 million for education, health care and other programs, releasing the money only after the legislature failed to override his veto of an income tax cut bill. Last year's battle came despite the fact that Missouri revenues had surged above expectations.

Missouri's tax revenues currently are 0.2 percent below last year's, with only a week remaining in the fiscal year, said Nixon's budget director, Linda Luebbering. Revenues also are running well short of the projections upon which next year's budget was based.

All told, Nixon froze or vetoed $786 million of expenses from general state revenues and $336 million dependent upon federal or other funding sources. Of those general revenue cuts, a little more than half are attributable to the shortfall in tax revenues, Luebbering said.

Nixon said the budget reductions also are partly due to erroneous legislative assumptions about tobacco settlement revenues and the legislature's failure to enact an amnesty program to encourage people with overdue taxes to pay.

The governor said the Republicans' refusal to expand Medicaid eligibility has worsened the state's finances by rejecting a potential influx of billions of federal dollars available under President Barack Obama's health care law. Republicans contend that Medicaid expansion would be too costly for the state in the long term.

Nixon contends the shortfall would be worsened by up to $425 million annually if lawmakers override his vetoes of various tax-law changes, including bills offering sales tax breaks to computer data centers, electric companies, restaurants and fitness centers.

"While eroding our tax base with new loopholes for special interests, the legislature simultaneously littered the budget with earmarks and new government programs, demonstrating misplaced priorities and a stunning lack of fiscal restraint," Nixon said.

Luebbering said more than $200 million of Nixon's budget reductions are due to the potential for lawmakers to override his vetoes of those tax-law changes.

Republican lawmakers have questioned Nixon's figures and defended many of the tax-break bills as mere corrections of tax policies that they say have been wrongly applied by the courts or Nixon's administration.

Business groups urged lawmakers to forge ahead with veto override attempts on the tax-break legislation.

While Nixon blamed lawmakers for causing the budget cuts, Schaefer said the governor should bear the responsibility for declining revenues.

"The governor's lack of economic policy in the state of Missouri is having a faster and more detrimental effect than anyone realized it would," said Shaefer, R-Columbia.

In addition to freezing funding increases for education, Nixon also put a hold on state employee pay raises, increased tourism promotion, expanded child care subsidies and restored dental and therapy coverage for adult Medicaid recipients that had been eliminated a decade ago. All of those could later be released at Nixon's discretion.

The items vetoed by Nixon include funding for a new economic development office in Israel, pay rate increases for mental health care providers, and the acquisition and renovation of a private hospital in Jefferson City to be used as an office building for the state and Lincoln University.

Nixon said he was eliminating 260 full-time state positions and closing 19 regional state offices, including seven for the Department of Revenue and six each for the departments of Mental Health and Natural Resources.

Comments

Oh, really? Does "MU," - normally used to signify the System's Columbia campus - HAVE campuses other than at Columbia? News to some of us! Apparently Ms. Brooks and the Associated Press have problems involving System nomenclature similar to those the Missourian sometimes exhibits. The so-called "System" has only been in effect for just over half a century, so we can't expect miracles, can we?

What will be the respective "cuts" for each of the other three campuses (UMKC, UMSL, MS&T), or hasn't System management decided that yet?